iPad’s Market Share Will Crater, but You Shouldn’t Care

Research firm Strategy Analystics got some attention with a report that showed Android accounted for 27% of the tablet market in the quarter ended Sept. 30. The report raised a lot of eyebrows.Kevin C. Tofel of GigaOm did some digging and found two significant issues with Strategy Analytics’ methodology.

Amazon's Kindle Fire

First, the Android numbers are for tablets shipped into the channel, not necessarily those sold, while Apple reports only actual sell-through. Second, the firm used a very broad definition of Android tablets. In particular, it included Barnes & Noble’s Nook Color. This is technically correct, but I’m not sure that a market that stretches from the iPad to the Nook is very meaningful.

By this standard, iPad’s market share is about to get a whole lot worse. Next month, Amazon.com will begin shipping the Kindle Fire, and all indications are that sales will be strong. Like the Nook, Fire runs a customized version of Android and if it is counted among Android tablets, their sales volume and market share will likely swell in the fourth quarter and beyond.

The number will undoubtedly set off a new round of speculation about what Apple must do to defend iPad’s market share. The correct answer is nothing, other than to produce the best product at the best price it can, consistent with its business strategy.

Apple does not care about market share and never has. It cares about absolute volumes and profit margins. And this has been a phenomenally successful business model that Apple should not and will not change. The history of the tech industry is littered with the corpses of PC makers that died chasing market share. Anyone remember Packard-Bell and AST? Dell and Hewlett-Packard nearly destroyed themselves chasing share at the expense of profit and Acer seems to be pulling back from the same fruitless race.

So Apple will serenely watch its share of whatever analysts choose to define as the tablet market inevitably decline as long as iPad volumes continue to grow and profit margins stay healthy. I think that the Kindle Fire and the likely successor to the Nook Color can both do very well without having a material effect on iPad sales. And everyone should just stop fretting about the meaningless market share numbers.

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.

Not to mention the fact that Strategy Analytics sound bites of “fading ipad dominance” fly in the face of evidence from NPD that Android’s worldwide share of shipping tablets has actually been shrinking over the last three quarters from 34% to 26.8% to 23% this quarter.

Anonymous

The Kindle Fire could completely wreck the Android tablet market if it is successful.

Now the Android OEMs must face Apple in the >$500 tablet market and face Amazon in the <$500 market, but they don't have a storefront to subsidize their devices. Amazon doesn't care about the Android ecosystem, the Kindle Fire is simply a mobile Amazon storefront. Amazon will simply milk the the hardware/OS for as long as possible and not worry at all about pushing the platform forwards, because they don't make any money off the hardware.

Anonymous

Not to mention Android will face pressure from Windows 8 slates throughout ALL of those same price points by late next year.

Anonymous

Especially if MS gets even more Android OEMs to pay MS for Android. (now over 50% are licensing Android from MS.)

Of course, MS will still need to do better than the prototype, steam powered, fan cooled, personal space heater brick with two hours of battery life they showed a couple months ago.

Anonymous

correct. there is certain to be a global flood of cheap commodity tablets within a few years from dozens of manufacturers in the developing world. just like there is now of feature phones (most of which will soon be some kind of “smartphone”). look what has happened to Nokia as it tries to survive in that commodity market – huge sales numbers/market share, but no profits at all, with its survival in doubt.

only a fool wants to win a race to the bottom.

Mark

Great article Steve; you made an excellent point about chasing market share at the expense of profits, and how that can lead to the demise of those companies who embrace that strategy.